Our long term goal is to regular FIRE by end-2033/beginning of 2034 (if all goes according to plan). We will continue to stay in CH for the sake of the kids (5Y and 1Y) education. We have no plans to sell our current apartment for at least the next 12-13 years. Even if we sell after that, we plan to move to a comparatively low cost canton within CH.
One thing we would target just before pulling the FIRE plug is to try and fix the mortgage interest rate for a period of (preferably) 10Y so that there are no questions/issues/challenges/complications with any mortgage lender against our income after FIRE (to cover the mortgage).
The current mortgage is 910,000 CHF and in a single tranche (5Y @ 0.65%). We intend to keep it in a single tranche going ahead. Our objective was to go for a fixed rate (5Y - 10 Y) in case interest rates were 1% or less. Failing that, our next step was to go for a SARON mortgage, provided it was cheaper than 5Y rate at the time of switch and then to convert into a fix rate mortgage if interest rates for 5Y - 10Y durations fall to 1% or lower.
The apartment was bought at 1.1 mCHF and it has been valued just recently by Global Bank at 1.6 mCHF.
The offer from Global Bank also states that we can stop amortisation after renewal. Currently we are both indirectly amortising the full yearly allowance into our Pillar 3A accounts (also with Global Bank) invested into their passive index funds.
One slightly complicating factor at the moment is that my OH has been laid off and will be unemployed soon (not ideal timing). For the sake of transparency, we are disclosing that to all prospective lenders that we have met so far. As can be imagined, some lenders are less than thrilled at that prospect and therefore are slightly reluctant to consider us for a refinancing (even though my annual salary is enough to cover the mortgage requirements).
Global Bank is also aware of this and to their credit (so far), they have given us detailed information and the previously mentioned offer without any pre-conditions on this topic.
Just got an offer from Raiffeisen for 950K buying price, where I will put 35% down (so 630k mortgage).
(Saron 26.03. : 0.199213%, value from bank)
Saron 3 years : 0.9% margin so 1.099213%
Saron 5 years : 0.8% margin so 0.999213%
Fix 5 years : 1.6%
Fix 10 years : 2.04%
I have the feeling they want to push me to Saron somehow
Same happens (and happened) to real estate backed loans. 4 decades without a bust doesnât mean there cannot be one. The most important difference: you can sell single stocks, but you cannot sell a room of your home.
We are now in the process of processing with the reservation agreement and the next steps.
I am monitoring the swap rates and they seem to be on a downward path again. Any idea how long do the banks take for it to reflect the downward trend in their interest rates?
Are you free to go with any lender? Does the seller have mortgages that must be transferred?
Normally you can ask the bank for their current fixed rates every day. It is usually only valid for that day specific day, if you get a quote at 11:30am, itâs unlikely to be different at 15:00 unless something wild happens in the swap market that day. But that quote will typically be invalid the next day.
Spread - Itâs sometimes hard to know what kind of margin they will add to the swap. When the rates went down in December, I noticed that some lenders didnât drop the by the same factor (they took more margin)
Your best bet is to get pre-approved by multiple lenders, have direct contacts at those lenders so that you can quickly get a quote and sign if you think its the right time (because of point #2).
Make sure you understand all the terms and conditions too.
thatâs really subjective, one could argue the opposite since December. Nobody knows.
This is straight from GPT:
Market Conditions & Rate Trends
1. What is the current swap rate for my preferred fixed term (e.g., 2, 5, or 10 years)?
2. How does the current swap rate compare to recent trends (weekly/monthly movement)?
3. Are central banks expected to raise, hold, or cut interest rates in the near future?
4. How do market expectations for inflation and economic growth affect rate movements?
5. What are other financial institutions predicting about rate movements?
Risk vs. Reward
6. What is the spread between swap rates and fixed mortgage rates (i.e., bank margins)?
7. Would waiting longer potentially result in a better or worse fixed rate?
8. If swap rates increase, how much more would I pay in interest over the fixed term?
9. If swap rates decrease, what is my opportunity cost of locking in now?
10. Am I comfortable with the risk of rates rising further if I wait?
Personal & Financial Considerations
11. Can I afford my mortgage if interest rates rise further before I lock in?
12. How long do I plan to stay in this property (does a longer-term fix make sense)?
13. Would a variable or tracker mortgage be more cost-effective given rate trends?
14. Am I prioritizing stability (fixed) or potential savings (variable/floating)?
15. Does my lender offer a rate lock option, and how long is it valid?
Yes, I was comparing from the beginning of March and Iâve been closely seeing it for the last 2 weeks. But, as you said, never know - it might go up again.
Yes, it is a new construction and the seller hasnât mentioned any restrictions. He has recommended 2 banks though who have evaluated the property. But, I am checking with at least 2 other banks.
How would this work? You submit all the documents with the bank, let them validate it and then just wait for the right time? This will anyways not be too long a time window as we would need to do the notarisation.
Yes, just ask them for their no-obligation quote process including all terms and conditions and what documents they need. Itâs usually the same stuff, so getting quotes from different lenders isnât much work once you already have done it once already.
Iâve structured mine so that I have 1 SARON tranche + 1 FIXED tranche, and with my lender I can convert some or all of my SARON at any moment to a FIXED. If I ever want to do so I would make sure it matches the expiry of my current FIXED, so that I donât get handcuffed to the lender upon renewal if I ever end up with multiple fixed tranches. This way I have some flexibility to amortize the SARON portion anytime, or lock in more if the fixed rates are low (my current fixed tranche is under 1%). If you decided to do something similar you need to read the fine print of the SARON terms as well as many lenders are putting that under a duration lock as well.
This is interesting. I was under the impression that once they quote an interest rate, it will be valid for âxâ number of days and will not be updated on the basis of the change in swap rates.
Ask the lender how it works, for my lender itâs only valid that day. You might also consider using a broker. I havenât used one myself but there could be some benefits to doing so. Maybe someone else has direct experience
The recent news coming from the US have lead the CHF to increase in value against both EUR and USD thereby reducing inflation expectations for the coming months. This market is crazy and you never know what can happen overnightâŠ
Assuming all banks now assume no rate cut in June why do you say No for mortgage fix falling? UBS is the biggest one and they said cuts are finished so if 1 comes it has to be treated as re-adjustment downwards as a surprise move.
Given the fall of 30 bp from the recent highs on the 10y swap and short term swaps now close to 0 I would say yes another cut in June or September is more likely than it was 2 weeks ago. But again the market is so volatile that the situation might be reversed next week⊠Base rates might have fallen over the past few days but the volatility makes it difficult for banks to implement low margins.
Hi everyone! First time poster and long time lurker here.
I wanted to see if anyone could give me some advice on taking out a SARON mortgage. Letâs say I am choosing between two banks that have given the following offers:
Bank A - 0.65% margin, 3 years
Bank B - 0.95% margin, unlimited term, need to transfer 100K assets to investment account
Now, obviously Bank A initially looks more attractive. But given recent global events, everything just seems really uncertain. We are concerned that if either me or my wife lose their job around the time when we need to renew Bank Aâs mortgage, then weâd find ourselves in a deep trouble (or saddled with really bad rates).
My theory is that with Bank Bâs unlimited term SARON, we donât have to worry about reassessments. So from the bankâs perspective as long as we continue to pay the monthly/quarterly dues, everything should be fine. We wonât have to worry so much if one of us temporarily loses employment - we are relatively certain of finding jobs given enough time.
From my calculations, a 0.3% difference in rates amounts to paying CHF 2,250 more per year if we choose Bank B (as well as their higher fees to trade/hold equities as I would be switching from IBKR). We currently feel it might be worth it to choose Bank B if we are able to negotiate a further 0.1 to 0.15% decrease in their rates, leveraging Bank Aâs offer.
I do not know how Bank A (or just banks in general) go about with mortgage renewals. Do they tend to give the same offer/rates? (ie what is the likelihood that weâd continue to enjoy the 0.65% margin in succeeding mortgage terms?) Is the assessment of your financial situation less intense as a new application? And am I correct in assuming unlimited term mortgages donât require reassessments? Are we crazy for potentially letting go of a really really good margin rate for something thatâs not worth it???
Sorry for the flood of questions! Let me know your thoughts - any and all feedback are welcome
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